Business Report: The Low Canadian Dollar and the Quilting Industry

Business Report: The Low Canadian Dollar and the Quilting Industry

Note from International Textiles:
Many of you have contacted us in the past several weeks inquiring about our price revisions.
In response to your questions, we are glad to provide you with some insight into the current
Canadian economy and how it impacts our business. We hope this article will help
answer many of your questions, but should you still have questions regarding
our pricing policies, please contact your rep or give us a call.

These days you can’t turn on the news without hearing about the dwindling of the Canadian dollar and watching economic experts debating whether or not Canada is in a recession. While it’s not my intention – or within my field of expertise – to analyze the current conditions and offer a stance on the subject, I’d like to review with you how the low Canadian loonie affects our industry. At the time of publishing this article, the Canadian dollar reached 0.7649 USD, and according to most experts is well on it’s way to passing the 0.75 USD threshold shortly (while some even predict it will sink as low as 0.70 USD this year!).

But how did this happen? Why is the loonie so devalued at the moment? Explanations range from the low price of oil, the economic uncertainty created by the upcoming federal election and the thriving US economy. “It’s a perfect storm of events that’s sinking the Canadian dollar,” Adam Button, a currency analyst with ForexLive.com, told CBC News in an interview. He cited the collapse in oil prices that began last summer and the soaring value of the U.S. dollar. (Source)

The lower value of the Canadian currency also impacts inflation – not only are imported good more expensive, but also the value of goods is starting to rise. This combinaison of economic factors explain why prices of goods, generally, have been on a rise these past few months.

The low Canadian dollar means that distributors, like us, have less purchase power in the world and have to pay more to get the goods from other countries. To learn more about rates of currency and it’s effect on importing/exporting, please watch this short educational video (the video uses the US as an example, but everything is applicable to Canadian currency as well).

But how does this economic situation impact the quilting industry specifically? As many of you know already, our industry is mostly based on imported goods since most fabrics are printed in Asian countries like China and Korea. This means that the cost to import these goods into Canada has risen with the lowering of the currency value. Fabric, and other products considered in economic terms as being ‘non-durable’ goods, are the hardest hit by this devaluation of our currency. That’s because they “are imported in high volumes and are more subject to currency fluctuations than durable goods, experts say.” In contrast, “durable goods, like cars, have negotiated prices and contracts months in advance at previously agreed upon prices. Those aren’t likely to be renegotiated.” (Source) Simply put, because we place orders on a weekly basis, every order we place for foreign goods is impacted by the currency value at that time.

“The low Canadian dollar will raise prices of domestic goods in Canada if the importers, such as retailers right across the board, are paying more, and in turn the consumer will have to make up for those costs,” said Monica Dale, Sault Ste. Marie Chamber of Commerce president. (Source) While some industries like tourism and manufacturing might feel some temporary positive effects, the retail industry is the most severally affected by this economic situation. On a more positive note however, we might see more and more consumers turning to brick and mortar stores instead of purchasing in American currency online.

It’s a matter of educating your clients that, regardless of the currency rate, shopping locally is beneficial to the Canadian economy as a whole. Watch the short CBC report below, and let us know how the currency changes have affected your business in the comments below!

6 Comments

I don't appreciate your sentence about people returning to brick and mortar stores. There are lots of on-line fabric stores in Canada; consumers don't have to purchase in U.S. funds to buy fabrics on-line. There are lots of other reasons people purchase fabrics on line, e.g. they don't live near a brick and mortar store, or they have difficulty getting out to the store, or their local store does not carry the particular piece of fabric they are looking for.

Jessica

Yes, you are right that there are many Canadian websites also selling fabrics and many reasons why people choose to purchase online. That's a good point! What I meant to say by this, is that people that were once tempted to purchase online in American currency (from the "big" e-commerce retailers in particular, to not name names) might decide against it in this economic environment. This will no doubt have a positive effect on Canadian businesses in the long run!

Thanks for reading!
Jessica

Linda

Nicely written article. What was not mentioned at all was the fact that with the combination of the dwindling Canadian dollar, oil prices low, these 2 causing a huge loss of jobs in many sectors and then the drought in a large part of the Canadian farm belt, many quilters cannot afford to purchase goods, at any price. It is a case of basic economics: when your buying power is less, you trim off all extras to pay for the necessities ( food, water, shelter, transportation). For most quilters, quilting is a "hobby", not a source of income. If you have to decide between necessities and hobbies, hobbies will run a poor second. This happens in every economic downturn.

Rhona

This is what I think should be done- we buy our cotton from China - large amounts to lower the cost, negotiate, have a factory, printing machines, have our own designers like in the usa and print our own fabric for the Canadian market so we don't have to buy from the states. I don't understand why this is not being done. The quilting industry is huge in the states and it could be huge in Canada and make a large profit!

Meta

About us

International Textiles Ltd. is a Canadian wholesale company with more than 60 years of experience in the textile industry; our standing within the textile community is one of excellent quality and service.

We are a family business committed to maintaining strong customer relationships while providing the best fabrics at the most competitive prices.